China to see record LNG imports as industries recover, expand

Liquified natural gas (LNG) storage tanks are seen at PetroChina's receiving terminal in Dalian, Liaoning province, China July 16, 2018. (REUTERS)
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Updated 26 September 2020

China to see record LNG imports as industries recover, expand

  • Despite the growth in demand, China is not expected to suffer supply shortages during the cold winter months when demand peaks

SINGAPORE: China’s imports of liquefied natural gas will likely grow 10 percent to new highs this year as companies scoop up cheap supplies to cover increasing industrial use and robust residential demand.
With its total natural gas use likely expanding at 4-6 percent this year, China is the only major bright spot on the world gas market, where demand is set to fall by about 4 percent as the global economy contracts due to coronavirus lockdowns.
LNG imports are set to hit a record 65-67 million tonnes this year, analysts and Chinese traders estimate, a tenth more than 2019's total and at a growth rate that could see China overtake Japan as the world’s top buyer by 2022.
Some analysts believe that China’s economy is now fairly much back to its pre-virus growth path.
“After taking a brief hit earlier this year due to the COVID-19 pandemic, China’s gas demand recovered faster than expected, driven mostly by the industrial sector that has recovered to 2019 levels since May,” said Alicia Wee, analyst at FGE.
Companies booked more super-chilled gas from Qatar, Russia and Australia, taking advantage of record-low prices earlier in the year as demand sagged elsewhere.

FASTFACT

Japan is the world's top buyer of LNG.

To accommodate higher LNG imports, top gas importer PetroChina reduced costlier pipeline supplies from central Asia, mainly Kazakhstan, using contract tolerances, said a Beijing-based PetroChina official.
“(Fourth-quarter)imports will remain robust . . . as LNG is both more competitive and flexible versus pipeline gas, despite a recent spot price spike,” said Lu Xiao, senior analyst at IHS Markit.
January-August imports of LNG rose 10.3 percent over the same year-ago period to 42.2 million tonnes, while piped gas fell 7.4 percent, Chinese customs data showed.
China sees natural gas as a bridge fuel on its long journey to reach carbon neutral by 2060, and since 2016 has switched millions of homes and thousands of factories to gas from coal. The gasification pace slowed along with the economy since 2019, but new pockets of industrial demand have emerged in manufacturing hubs such as south China’s Guangdong and east China’s Shandong provinces.
In Guangdong, China’s first region to import LNG, authorities are pushing ceramic and glass makers to burn gas instead of coal, which will likely generate up to 8 billion cubic metres of fresh gas demand this year, or 2.6 percent of the national total, according to a report carried this week by the Shanghai Oil and Gas Exchange.
Guangdong, the top gas power generator by province and second-largest gas consumer after Jiangsu, added 3 gigawatts of capacity in the first eight months to raise its total to 26 GW, more than a quarter of China's total, said IHS Markit’s Lu.
Residential demand also continues to grow, accounting for roughly 30 percent of total demand, said independent gas distributor ENN Energy Holdings and China Resources Gas Group, which each connected more than one million households to their pipeline network in the first half of 2020.
Despite the growth in demand, China is not expected to suffer supply shortages during the cold winter months when demand peaks.
Domestic gas production has also expanded. It is up nearly 9 percent in the first eight months versus a year ago as PetroChina and CNOOC Ltd stepped up domestic drilling to meet national supply obligations.
Companies have also filled underground storages with total effective working capacity of 14 billion cubic metres.
“Sufficient supplies and flexible demand make gas shortage a remote possibility,” said Huang Miaoru, senior manager at Wood Mackenzie.


Hermes echoes global luxury sales rebound

Updated 15 min 35 sec ago

Hermes echoes global luxury sales rebound

  • Handbag icon reaps benefits of online surge in Asia as pandemic curbs ease

PARIS: Hermes’ comparable sales picked up in the third quarter, rising 7 percent, and the Birkin bag maker said this positive momentum had extended into October after a rebound in Asia and other regions as coronavirus restrictions eased.

Luxury goods manufacturers were hit hard by store closures during lockdowns to combat the pandemic and sales for the industry as a whole are expected to fall by up to 35 percent this year — an unprecedented plunge after a decade of stellar growth.

But a gradual re-opening, even as governments bring in fresh measures to fight rising COVID-19 infections, has helped sales to recover. High-end labels, which used to be more reticent to sell their pricey products online, have also seen web revenues surge.

Hermes — known for its $12,000-plus handbags like the Birkin, which often generates waiting lists — already sells a selection of leather goods online, but said it would make a larger push.

“We are going to gradually increase our offer of products online, except for the very iconic products such as Birkin,” finance chief Eric du Halgouet told reporters.

He said the online channel had now become the group’s “biggest store,” with revenues exceeding those of any of its flagship shops. Sales online grew by nearly 100 percent in all regions in the first nine months of the year.

Hermes’ comparable sales, which strip out the impact of foreign exchange rates and acquisitions, came in at €1.8 billion ($2.13 billion) in the three months to end-September — making it the first luxury brand to post rising overall revenues in the third quarter. Sales of leather goods grew 8 percent in the period while fashion sales were also up, echoing buoyant trends at Louis Vuitton owner LVMH.

“We think this performance reflects the strength of the brand, continued polarization between winners and losers and better insulation from a lower than industry average exposure to tourist demand,” said Citi analyst Thomas Chauvet.

Growth in the third quarter was strong in Asia, where lockdown restrictions were eased first, with sales up 25 percent, while revenues fell by 15 percent in Europe — including a 23 percent drop in France — and by 5 percent in the Americas.

Despite the overall rebound, revenue from Hermes silk scarves were down 20.5 percent in the period. The group said that was due to an unfavorable comparison to a year ago and lower travel retail activity.

Du Halgouet said the positive sales trend of the third quarter had continued into October and the group had not yet seen an impact from new restrictions imposed by European governments as contagion numbers rise again sharply.

But Hermes struck a cautious note for the full-year outlook, saying the impact of the COVID-19 epidemic remains “difficult to assess, as the scale, duration and geographic extent of the crisis evolve every day.”

At constant currencies, sales in the first nine months fell 14 percent to €4.29 billion.